Record budget 2025: billions for security, debts are rising rapidly!

Record budget 2025: billions for security, debts are rising rapidly!

On June 30, 2025, the new federal government, led by Federal Finance Minister Lars Klingbeil (SPD), presented the draft budget for the current year. This draft comes amid significant financial challenges after the previous government collapsed over budget preparation. The Federal Cabinet has approved the draft, which not only includes the key figures for 2026, but also a rough financial plan up to 2029. Particularly noteworthy is the approved law establishing a special fund for infrastructure and climate neutrality.

The planned expenditure for 2025 amounts to a total of 503 billion euros. The investment amount in the current year consists of:

• 62,7 Milliarden Euro im Kernhaushalt,
• 25,7 Milliarden Euro im Klima- und Transformationsfonds,
• 27,2 Milliarden Euro aus dem neuen Sondervermögen.

New debt and defense budget

New debt for 2025 amounts to 81.8 billion euros and is expected to rise to 89.3 billion euros by 2026. In the context of security policy, the federal government plans to increase the defense budget to 62.4 billion euros for 2025, which corresponds to an increase of over 10 billion euros compared to the previous year. This spending corresponds to 2.4 percent of the gross domestic product (GDP) and is part of a long-term plan: by 2029, the defense budget is expected to increase to 152.8 billion euros, which is three times higher than the current budget.

This increase is necessary to meet NATO's new target of investing five percent of GDP in defense annually by 2035. In addition, expenditure on external and internal security will be exempt from the debt brake in the future, which will create more scope for financial resources.

Policy responses and fiscal priorities

The government has set three key financial policy priorities in the draft budget: investments for growth and security, structural reforms to ensure competitiveness and relief for citizens, and clear budget consolidation with concrete savings. Nevertheless, there is already criticism from opposition parties. The Greens criticize subsidies for gas, which are financed from the climate and transformation fund, while the Left criticizes high defense spending and its negative impact on municipalities.

The new debt figures for the coming years are also significant. New debt of 89.3 billion euros is forecast for 2026 and 87.5 billion euros for 2027. From 2028 onwards, net borrowing is expected to increase to 115.7 billion euros, which will primarily be caused by the expiry of the Bundeswehr special fund. These loans, together with a new special fund for infrastructure and climate protection, will further increase the country's debt burden.

The approval of the Bundesrat and Bundestag is required in order to finally implement the government draft. The upcoming political debates promise to be exciting as the government tries to find the balance between investment, debt and the legitimate demands of the opposition.

The financial challenges are characterized by rising interest costs that the federal government will have to bear in the coming years. The developments in the coming months will be crucial for the long-term sustainability of German financial policy. Further information can be found on the Authorities mirror and Bavarian Radio.